It is shown that nonmarket-clearing prices can persist in noncooperative Nash competition among firms when the dis semination of information depends critically on the flexibility of pr ices. The key to this explanation is that the value of the informatio n revealed by quantity signals when...

The paper develops a rigorous model of the interaction between employment, income and demand. It is shown that when agents are differently informed about the income generated in the economy, aggregate demand shocks create a Keynesian-type unemployment. Moreover, the model explains nominal...

Rules and discretion in public sector decision making are compared in a macroeconomic setting where there is a potential role for an active stabilization policy when the policymaker has private information about nominal shocks. The credibility of announcements about the state of nature is shown...

Restraints on the public budget may limit the ability of the public sector to use financial markets for the diversification of shocks. This interferes with the role of the public budget as a buffer which may provide insurance by stabilizing income and thereby private consumption. We consider...

The role of asymmetric information and the incentive to acquire information is considered for a monopolistically competitive economy. To focus on nominal rigidities, the money stock is the only state variable, and it is shown how informational problems can cause nominal price rigidities. Under...

The coordination of production and consumption decisions is analysed in a static model where the interdependence between production, income and demand is explicitly modelled. With imperfect competition and non-convex production technologies it is shown that there exists a zero pure profit...

The ability of insiders to extract rents associated with exogenous turnover costs is addressed in a dynamic model. The higher these rents, the higher is the incentives for outsiders to obtain future insider status and, thus, to underbid current insiders. As a consequence, there is a lower limit...